Lilo Ltd Sells Inventory Items to Its Subsidiary Stitch Ltd

question 22

Multiple Choice

Lilo Ltd sells inventory items to its subsidiary Stitch Ltd.If during the financial year 2013,the unrealised profits in ending inventory in Stitch Ltd exceeds that of its unrealised profits in beginning inventory,which of the following statements is correct with respect to Lilo Ltd's consolidated financial statements after considering these transactions only?

• A) Consolidated profit will decrease.
• B) Consolidated deferred tax liability will increase.
• C) Consolidated ending inventory will decrease.
• D) Consolidated sales will be unaffected.

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Definitions:

Cash Disbursements

Outflows of cash for various purposes, including operating expenses, asset purchases, and other business activities.

Cash Disbursements

Money that is paid out by a company, often including expenses, dividend payments, and other cash outflows.

Administrative Expenses

Costs related to the management and general operations of a business, such as salaries of non-sales personnel, rent, and utility expenses.

Selling Expenses

Costs associated with the marketing and sale of products or services, including advertising, sales commissions, and store fixtures.